Example A: the Reimbursement Operations in Health (ROH) Department
The VKG, particularly their subsidiary Consal Beteiligungsgesellschaft AG, offers private health insurance across Germany. A key area of the company’s business is providing a particular type of private health insurance to civil servants. The competition in this specific market is fierce, even for the standards of the highly competitive general private health-insurance market in Germany. What is more, according to the KUBUS survey, customer satisfaction in this specific market is low, which might be partially explained by the dominance of outdated products and services. Finally, the highly individual character of this particular service makes it hard to standardize operations and processes and to implement efficiency goals in practice.
At the VKG six departments deal with this kind of private health insurance and the challenges we have just described. To demonstrate how the Top 3 project helped these departments tackle the problems they were facing, we chose to focus on the ROH department. The ROH employs 15 full-time staff who deal with sales, insurance claims and customer queries. This means that the ROH staff are constantly in direct contact with VKG customers and handle large amounts of sensitive material regarding personal health issues—for example, in order to provide information to customers on the conditions that the VKG’s private health insurance covers.
Figure 6 reveals that, by the end of its wave, the ROH department had made considerable progress in all four Top 3 goals. According to the customer barometer, customer satisfaction had increased from 63.1% to 69.8%—a great success that in turn increased the company’s competitive advantage, given the poor ratings of customer satisfaction in this market. Additionally, the ROH department almost met the Top 3 efficiency goals, which are measured by the number of customer operations per employee per day: staff processed an average of 29.8 customer operations per day after the Wave, which is close to the target of 30.5. The ROH staff managed to increase profitability by reducing the loss ratio as a key performance indicator (KPI) to a value of 82.7%, which is not far below the target set at the beginning of the Wave (83.4%). Finally, employee satisfaction increased from 26.0% to 37.4%.
At the beginning of the Diagnosis Phase, ROH staff and executives, together with the Navigators assigned to the department, used Value Stream Mapping to gain an overview of the department’s activities and processes. Applying a Skill Matrix and Standard Week Observation helped identify the staff’s capacities and capabilities, which were matched to the visualized value stream. The latter had already enabled the participants to identify some unproductive time—in Lean terms, waste—and to progress to the Design Phase, which followed the 0-Measurement benchmarking process.
The Navigators organized Transformation Workshops with the employees and the department head. Together they set the Ambition Levels for each of the four Top 3 goals. The ROH staff accepted unproblematically the KPIs that were applied to evaluate the efficiency and profitability of the department’s performance, as the same KPIs had already been used before the Wave. However, the daily, transparent, real-time reports on efficiency and profitability, which were generated in the Performance Dialogs by means of dashboards, were new and made the staff much more aware of those indicators. This new awareness encouraged staff to make suggestions on how to improve various processes, products and services and therefore the results, as measured by the defined KPIs. One such suggestion, for example, was to simplify the design of the software interface that was used for the internal processes of payroll accounting.
These improvements in efficiency freed up time, which the employees invested in providing better quality customer service and thus strengthening customer relationships. For example, ROH staff now spend time to recommend doctors, give tips on additional benefits that an insurance product offers or just listen to anxious customers. Both customers and employees value demonstrable customer care and empathy tremendously, so, in this case, improving efficiency was very much in line with the Top 3 goals of increasing both customer satisfaction and employee satisfaction. Enabling staff to access customer feedback almost instantly through the customer barometer also helped the department achieve the Top 3 goals. Instant access to feedback allowed staff to measure the level of customer satisfaction and identify flaws in the department’s products and services as well as improve their individual communication skills. Acting on feedback had a positive impact on both customer satisfaction and employee satisfaction. It also motivated staff daily to do a better job and help customers.
The Design and Implementation phases also resulted in a change that—perfectly in line with the Lean philosophy—increased efficiency by reducing the time it takes to complete a process and increasing customer satisfaction. Before the Wave, ROH staff communicated with customers mostly by letter. This has two drawbacks: first, the letters are often ponderous; second, delivering letters requires at least a couple of days. During the Wave, the department decided to use phone calls and e-mail much more extensively to communicate with customers, as these channels provide a much faster way of answering relatively unproblematic queries. This modification enabled employees to resolve simple problems in a single attempt.
The ROH example illustrates how improving flow can make processes more efficient, deliver results faster and, as a consequence, increase customer satisfaction. Staff participation in the Top 3 project was high at ROH and the feedback that staff, executives and Navigators exchanged was very positive. For that reason, it is not surprising that the department regularly uses the implemented problem-solving process that Fig. 7 illustrates.
This tool is based on Kaizen and ensures that staff continue to pursue all four Top 3 goals even after the Wave, i.e., in the Control Phase. Whenever a problem arises, staff discuss it and try to identify its root causes in the next scheduled Performance Dialog, regardless of whether it occurred during a previous Performance Dialog or during a process or was reported by a customer. In most cases, the problem cannot be solved immediately and is assigned to a member of staff, whose task will be to find a solution within a specified time frame. This individual then sets up a working group to generate ideas and to track progress. The solution to the problem and the results of the tracking process are shared in a subsequent Performance Dialog with the whole department and implemented in a timely fashion.
Example B: the Basic IT Support (BITS) Division
Digitalization is without doubt one of the most prominent trends in the market. The possibilities of combining artificial intelligence with big data appear to be unlimited. Pure digital insurance startups attract a lot of attention from investors and collect billions of dollars of equity capital (Walthes et al. 2019). However, companies selling a broad range of products tailored to very specific demands still depend on the intelligence and empathy of their human resources—their employees—to satisfy their customers. In the case of companies such as the VKG, legal requirements also impede comprehensive digitalization, as some contracts still need to be physically signed by the customer. Therefore, it is necessary to ensure that VKG staff who are in direct contact with the customer receive basic IT support in four service areas: (a) print, (b) customer and workplace services, (c) administration of workstations and services for mobile devices, and (d) management of workstations and multimedia systems.
At the VKG, the division called BITS of the VKBit Betrieb GmbH (VKBit), a subsidiary wholly owned by the VKG, provides these services to internal customers, such as the ROH department. The subsidiary as a whole has around 200 employees and is responsible for the entire VKG IT infrastructure. Here we focus solely on the BITS division, which comprises four departments and employs around 100 staff in total. Each of these departments is responsible for one of the four areas listed above. At BITS the Top 3 approach was applied to all four departments simultaneously, because the challenges they face are very similar. The BITS example illustrates how an internal supplier of the VKG implemented the Top 3 approach and how the company managed a Wave that was launched simultaneously in more than one department.
One of the challenges the BITS division faced was the design of the automated ticketing system that assigns instantly customer requests to staff by a simple push process on the “first come, first served” basis. Customer requests, however, are highly heterogeneous in terms of complexity, so the time it takes to process a ticket and receive a new one varies widely. Before the Top 3 project was implemented, tickets were neither prioritized nor redistributed among staff. As a result, it was frequently the case that some employees would struggle to process all tickets assigned to them on time, whereas others would sit idly.
Although overall customer satisfaction was acceptable before the Wave, communication between BITS staff and its customers was often problematic. On the one hand, customers would frequently not provide the necessary information for staff to identify the root cause of a specific problem; this required staff to contact those customers repeatedly to request more details. On the other hand, BITS staff were more technically oriented than customer-focused, which hampered communication and resulted in misunderstandings. A third issue that needed to be tackled was that the BITS management structure had a negative impact on the division’s development. Executives were too preoccupied with the day-to-day business to see to their management duties. Moreover, service-level agreements between BITS and its internal customers at the VKG (e.g., stipulating the time frame in which staff had to complete dealing with a ticket) were not up to date because recent technological developments had not yet been incorporated satisfactorily. What is more, in the absence of adequate performance metrics, the BITS managers relied exclusively on the internal service-level agreements as performance metrics. All of these factors led to inefficiency, low profitability, and contributed to low employee satisfaction.
The four BITS departments applied the Top 3 approach to tackle the challenges we describe above and to contribute to the overarching Top 3 goals. Figure 8 shows the aggregated results of the four departments. As a result of Top 3 project, employee satisfaction increased significantly and even above the target level. The goals for efficiency were measured by reduction of full-time employees. Although BITS did not achieve the set Top 3 goals during the Wave, it did make some progress, which served as the basis for further improvement. The increase in profitability also fell short of the target. Nevertheless, improving various processes and reducing time wastage did save BITS 70,000 euro per annum, so, in terms of profitability, there was some progress as a result of the Wave.
In the Diagnosis Phase, the Navigators analyzed how staff handled incoming tickets, which is how BITS creates value for its customers. They also monitored various processes and interviewed staff as part of Value Stream Mapping. The team used a Waterfall Diagram to arrange the processes into a logical order and identify which step in a particular process staff would need to complete before moving on to the next step. They also used a so-called Heatmap to visualize their analysis and identify problems in capacity. The Heatmap revealed that most tickets were opened in the morning and that the early part of the week is the busiest time for staff. To track and control the progress of Top 3, all four BITS departments surveyed both employee satisfaction and customer satisfaction in the Diagnosis Phase to determine the start values (0-Measurement).
The results of the Diagnosis Phase highlighted the processes that would have to be improved in the subsequent Design and Implementation Phases. During several Brainstorming workshops, staff tried to identify the potential causes of the problems BITS commonly faced and concluded that the executives should focus more on their managerial duties, instead of providing operational expertise. Through these meetings, the participants were also able to define a Vision and a Mission for each department. Specifically, they concluded that they would have to balance better the capabilities of BITS with customer expectations. To measure the progress of the project, the Navigators and staff first defined the Ambition Levels for each of the four Top 3 objectives before defining and implementing concrete improvements.
The BITS staff streamlined and standardized its processes according to the Flow Principle. As a result, they eliminated media disruptions in key processes, reduced the number of tools IT staff used, automated several tasks (e.g., routing jobs) and clarified their scope. Following the idea of Poka Yoke, BITS staff introduced a more structured ticketing system with only a few basic mandatory input fields with predefined dropdown menus. The new design improved the quality of the tickets and reduced the time staff wasted on collecting all required information to process a ticket. These Lean measures enabled staff to reduce the number of unproductive hours and at the same time boost the speed and quality of the BITS service, which in turn increased both employee satisfaction and customer satisfaction.
To reduce the executives’ operational workload and free time for their managerial duties, daily Performance Dialogs were introduced in all departments. These dialogs provided a platform on which staff could exchange views on lessons learned and share best practices directly, without the need for managers to mediate. Furthermore, the surveys that continuously track KPIs indicate that this permanent departmental training also increased cooperation and employee satisfaction. Executives now use some of the freed time to provide every member of their staff with regular feedback, which appears to boost job satisfaction. After the Wave, Performance Dialogs continued to take place two or three times a week; daily dialogs were no longer considered necessary.
The BITS division also optimized its capacity planning on the basis of the Heatmap analysis. As a result, more employees are now available in the morning than in the afternoon, incoming tickets are prioritized according to urgency and non-urgent problems are given lower priority. This change has enabled staff to balance their workload more evenly throughout their working day. Updating service-level agreements with internal customers also improved capacity planning: in the updated documents, the quality and objectives of different services are described in more detail, which has helped adjust more precisely the scheduling of the handling time allocated to each service.
The customer surveys in the Diagnosis Phase revealed that solving customer problems quickly is crucial for improving their perception of service quality. Ideally, an issue should be resolved on first contact with a customer or, if this is not possible, at least on second contact. Consequently, BITS staff now increasingly call customers, arrange on-site visits and expand the use of a newly introduced internal chat program to conclude the issue at hand in a single session, rather than exchanging e-mails over several days. They have also introduced a permanent survey to track customer demands and satisfaction continuously. The new KPIs that BITS defines are based on the results of the survey. Following the principle of the technique “Close the Loop”, negative feedback prompts the employee responsible for a case to act swiftly and resolve it.
Lessons learned from the implementation of Top 3 project
The VKG’s Top 3 project is a success story. Several goals have already been achieved and, as further improvements are to be expected, it is likely that the company will achieve 100% of its goals in the near future. The continuous evaluations in individual departments and the KUBUS study results we obtained after the Top 3 project had been launched also indicate that the initial goals of the various Waves have been accomplished. What is more, many departments have even exceeded expectations, which demonstrates that the manpower the VKG allocated to the Top 3 project was indeed adequate. For example, with the support of one Junior and one Senior Navigator per department, the Top 3 project occupied the ROH and BITS department heads two to three days a week during the 12 weeks of the respective Waves, while each member of staff only had to invest 2 h per week in the project.
Short-term efficiency gains do not automatically imply that good results will be sustained in the long run. At the VKG, the question of sustaining what was achieved during a Wave did arise in the course of the Top 3 project. To sustain those achievements in every dimension of the project, the company has taken several measures and, so far, these measures seem to be successful. The tools of Top 3 approach have enabled the VKG to overcome the obstacles that typically make it hard to sustain efficiency gains. Overall, the Top 3 project has succeeded where numerous similar projects have failed and can therefore serve as an inspiring example (Bhasin and Burcher 2006; Kumar et al. 2008a, b; Martínez-Jurado and Moyano-Fuentes 2014). The project’s success is noteworthy, particularly because the Top 3 approach was applied across the organization and was adapted to the very different needs of the various departments, as the examples of ROH and BITS show. We are therefore confident that this approach can be successfully applied widely in the service sector. To enable companies in this sector to benefit from applying an LSS approach to the same extent as the VKG, we would like to share some of the most important “lessons learned” during the project. Our observations build on and extend research on the factors that are critical to success when using Lean, Six Sigma, and Lean Six Sigma (Albliwi et al. 2014).
In the literature, providing appropriate training to employees is often highlighted as a factor that is critical to company success (Goh 2000; Coronado and Antony 2002; Chakravorty 2009), so it is hardly surprising that the VKG invested considerable resources in training its staff. As we have already mentioned, the appointed Navigators trained the staff of every department that went through a Wave. The Navigators had already gone through comprehensive, certified training in project management and in the methods of Lean and Six Sigma before training others to apply the principles and tools of the Top 3 approach. The VKG used an international consultancy to train the first team of in-house Navigators and included both consultants and VKG staff in those first teams. This approach enabled staff to gain hands-on experience before going on to direct a wave without the support of external consultants. Despite the significant costs of creating an internal improvement-specialist pool, the VKG’s decision to do so seems to have paid off. Staff could relate more easily to the internal Navigators than to the external consultants. This helped create an atmosphere of trust that was conducive to achieving successful solutions and results. In the case of the ROH department, we observed that staff accepted more readily suggestions made by colleagues, rather than by Navigators. For that reason, in the first Performance Dialogs, the Navigators retreated to the sidelines to give staff sufficient room to express concerns and suggestions. It is also worth mentioning that the VKG’s Navigator program has opened up interesting possibilities for internal career progress and contributes to employee retention.
Overall, the Navigator program proved very successful. Nevertheless, in the course of the Top 3 project, it needed a few adjustments. For example, in the case of the highly specialized ROH department, attempting to use various LSS tools “out of the box” hampered progress at the beginning of the Wave and led to dissatisfaction among the department’s staff. However, as the Wave progressed, the Navigators got to know the department much better and adapted those tools to its specific capabilities and needs. This was key to transforming the ROH department successfully. Two factors proved crucial to helping the Navigators adjust the tools they implemented to the needs of the department: first, holding regular meetings with the ROH’s executives. In fact, the open atmosphere of those meetings at ROH proved so productive, that the participants suggested that this feature should become integrated into future Waves, as indeed it did. Second, combining the Navigators’ methodological training and the executives’ familiarity with the staff and their detailed knowledge of how the department operates. All in all, the ROH Wave made clear that even the best-prepared Navigators cannot expect that in the space of a few weeks they will become as familiar with a department as the people who have worked there for a while. Now, to facilitate the project, Navigator teams spend more time on familiarizing themselves with a department’s peculiarities before launching a Wave.
Another factor that researchers regard as critical to the successful implementation of Lean Six Sigma is a committed top management that leads by example to convince the entire organization that change is feasible (Henderson and Evans 2000; Delgado et al. 2010; Laureani et al. 2010). Harald S. Fanderl, senior partner at McKinsey & Company and expert in TOP 3 methodology summarizes: “In short: the kind of transformations that projects such as Top 3 can achieve are much more likely to be successful if the top management demonstrates clear commitment at the outset. The VKG stands out because it succeeded in pursuing and achieving goals that are often considered incompatible: it managed to improve dramatically customer satisfaction, which is now above the average score in the insurance market, and simultaneously reduce cost and improve employee satisfaction. The VKG's effort is manifest in the over 30 Waves that have taken place since the beginning of Top 3. It goes without saying that being open to change and introducing significant changes in the company's leadership are the backbone of this success”. At VKG the CEO sponsored the Top 3 project, sending a strong signal to everyone in the company that the project had top priority. Additionally, in the spirit of Lean, the VKG shortened a number of managerial processes and decision paths; for example, by inviting executives and staff to discuss jointly changes to the organization’s structure. This ensured that everyone, including executives, would need to adapt to such changes. However, for the success of projects such as the Top 3, commitment is necessary also on lower hierarchical levels. At the VKG’s BITS division, for example, some managers who failed to show commitment to the Top 3 project and were unwilling to change had to be replaced. Some of the longest-serving employees also resisted such changes. Negative attitudes to the Top 3 project were more prevalent at the four BITS departments compared to other departments at the VKG. One possible reason for this is that the BITS division, as part of the VKBit subsidiary, is more removed from the problems and needs of the insurance business, both contextually and organizationally. To address the difficulties that arose at BITS, executives who were committed to Top 3 project scheduled a series of workshops to discuss the project openly with the department’s employees and to inform them about what it involved. This measure raised the approval of Top 3 project amongst BITS staff and, a year after each BITS department had completed its Wave, the improvements that resulted from the project were acknowledged universally throughout the division.
Similarly, the Wave at the ROH department showed that transparency, informing staff about which processes have to be modified and how and updating staff on the project’s progress are critical to its success. People become quickly frustrated by lack of information and misunderstandings and lose their motivation to see a project through to its completion. At ROH, staff reacted in precisely this way when the Navigators neglected to inform them that an employee-reward program that had been announced as part of the Wave would be postponed. It is quite likely that if staff had been informed about the technical requirements of implementing the program and about the fact that the VKG had little control over when it would be implemented, they would have shown understanding.
A further factor that is crucial to the success of projects such as Top 3 is choosing carefully when they should be implemented in which departments and in which order (Henderson and Evans 2000; Antony 2006; Pepper and Spedding 2010). Starting with departments that were either relatively small or relatively free of conflicts proved to be the right way forward at the VKG. The team that planned the Top 3’s Waves thought very carefully about whether a Wave should take place simultaneously or successively in similar departments, on the basis of criteria such as Navigator capacity, the need to keep business operations going and potential gains in efficiency. The experience of conducting the Waves simultaneously in the four BITS departments shows that despite the similarities, no cost-reducing synergies arose from this exercise.
Spelling out the goals of the department at the beginning of each Wave so that everyone involved is clear about them is also important. From our perspective, visualizing these goals concisely (see Figs. 6 and 8) helps every employee focus on the required improvements. Tracking progress, as well as mistakes, continuously and discussing them openly during regular Performance Dialogs helps provide timely feedback to staff, executives and Navigators. Also, employees tend to accept such projects more readily when their success is measured by comparing the target values and the values that are actually achieved (Delgado et al. 2010). To that end, the VKG introduced a so-called transparency cockpit to track the success of every single Wave and to assess the overall impact of the Top 3 project.
In the case of the VKG, increasing profitability—one of the four goals of the Top 3 project—was the target that employees feared the most, because of the perception that this goal can only be achieved by cutting jobs. However, the VKG re-invested around two thirds of the savings a department achieved in that department—for example, to improve working conditions or develop new products. This approach gave staff an incentive to improve bottom-line results. A further incentive was ensuring that the company would not increase the staff’s workload in response to freed time, but would use this time to allow staff to focus on customer support, get specialized training on handling non-routine, challenging tasks and deliver tasks that had previously required external support.
The degree to which individual departments sustain the positive results of the Top 3 project after the Navigators have gone is reflected in the extent to which staff have integrated the various tools and ideas of LSS into their everyday work. In practice, not all departments continue to use these tools and ideas to the same extent. For example, the Performance Dialog has been established in all departments as a platform on which staff can share insights and discuss various issues with executives. Similarly, the Skill Matrix is widely used to assess staff and develop their skills. In contrast, whereas ROH employees now try to handle most problems internally and instantly, there is still scope for improvement in this regard at the BITS departments. This difference may arise because technical and financial constraints make it harder for BITS staff to adopt that approach, whereas ROH staff work closely with customers and are able to improve problematic aspects of their work quickly, which boosts their motivation.